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U.S. Tech Funding – What’s Going On?

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Re: U.S. Tech Funding – What’s Going On?

#81

Post by foobarqux »

vasilipupkin wrote: post #79
foobarqux wrote: post #15

Lot's of points to dispute: Slides talk about S&P IT but no one is concerned with IT public market valuations (at least relative to the rest of the public market). The concern is with private tech market. Slides talk a lot about how the amount of funding is justifiable but the question is whether the valuations are. Lower amounts of funding do suggest there is less at risk, however. How do you reconcile slide 37, whi…

you can own an index of unicorns if you are an LP in a16z :)

No, you can own some unicorns but not all of them or something that represents all of them. I suppose you could invest in the top 5-10 VCs but in either case you would also own a bunch of non-unicorns. It would be like saying you can buy an index of CPG companies by buying the S&P500.

Re: U.S. Tech Funding – What’s Going On?

#82

Post by clarky07 »

nugget wrote: post #40
beambot wrote: post #28

Earlier quoted context omitted.

Except that the valuations are meaningless without understanding all the other undisclosed terms granted to the VCs in the latter rounds (eg. liquidation preference, participating preferred, etc).

How important is a liquidation preference on a $500m round which values Uber at $40b? Not very. Moreover, most of the institutions doing these late stage rounds and secondaries are the same banks and asset management firms that float the IPOs. One of the unintended consequences from SOX is the creation of this public-private funding environment where huge private firms and high net worth individuals can invest, but s…

>If you believe that small retail investors should be protected from themselves when it comes to early stage investing, this is a good thing.

Alternately, the small retail investor isn't getting the chance to make life changing amounts of money by putting 1k into Microsoft or Amazon.

I suspect I (and lots of other people) would have been willing to invest in Facebook when it was a 1 billion company. That would be a 270x return from now. If you bought at IPO you'd be a little more than 2x now. Alternately, if you bought at the absolute bottom it's ever been you'd be at 4x.

Certainly 2x and 4x are nice, but they don't make you wealthy in the way 270x does.

Re: U.S. Tech Funding – What’s Going On?

#83

Post by foldr »

nostrademons wrote: post #12
michaelvkpdx wrote: post #4

My takeaway- the VC's have leveraged the money from their successes to create a vortex that sucks in money from consumers, into privately owned companies, back into VC pockets, and back into more companies that get more people to spend more money. The tech vortex that is sucking away quality of life from the middle class and padding the billionaires (and large company) bank accounts. Throwing out a few bones on occas…

That's the way capitalism has always worked - it is up to you to make deals that increase your overall level of happiness, and it's up to your counterparties to ensure that those deals also increase their happiness. In past years, instead of "VCs" the villains have been hedge funds, private equity, corporate raiders, giant conglerates, corporations in general, investment trusts, robber barons, and colonial empires. I…

>The reason money gets drawn away from "the average person" and collects in "billionaires and large companies" is because the average person values money for what it can do for them, while billionaires and large companies value money as a scorecard.

That's the reason that people buy things from people who sell things, not the reason for the unequal distribution of wealth. There is no logical necessity in people's spent money accumulating in a small number of pockets. Clearly, given the enormous variation in the distribution of wealth through even recent history, there must be many other factors at play.

Re: U.S. Tech Funding – What’s Going On?

#84

Post by sumedh »

j_baker wrote: post #2

Robert Shiller had an interesting analysis of the current stock market's "frothiness": http://www.businessinsider.com/robert-shiller-stock-market-b... Basically, the stock market is a bit overvalued, and people expect that trend to continue. However, peoples' level of confidence in the stock market pricing is very low. To me, if there's a coming crash, it's going to be because investors are overly anxious rather than…

Robert Shiller is an academician not an investor. During 2009 when the market was at an all time low he told Steven Schwarzman that the market would remain low for many years, Steven said no, it would bounce back in less than a year.

Steven was right.

Re: U.S. Tech Funding – What’s Going On?

#85

Post by AndrewKemendo »

thorfish wrote: post #17
pkaye wrote: post #11

Earlier quoted context omitted.

I see it as the cost of forming a startup is much lower now so they can stay private longer. Combined with VC companies and angel investors flush with money, they are keeping the companies private longer to capture more of the gains. Then there are established companies who want to stay relevant who throw money at startups with no profit in sight but cool technologies. My guess is that in the end, problems will come…

I see it as the cost of forming a startup is much lower now so they can stay private longer. I don't think that is true. Sales and marketing is still very expensive. SaaS needs a lot more cash investment than traditional software, since you are only making the money back gradually. Many of these unicorn software companies are raising a half dozen rounds. Also, the easier it becomes to write software the for the inter…

In fact as a founder I don't think there is anything cheap or easy about it. Especially if you are trying to do anything with significant technical challenges like with computer vision, deep learning, VR etc...

Re: U.S. Tech Funding – What’s Going On?

#86

Post by saryant »

marincounty wrote: post #53
TTPrograms wrote: post #7

Earlier quoted context omitted.

Hopefully gradual increase in interest rates will result in stabilization of stock value as people pull out for safer low-rate returns (which are basically non-existent now). Then again the fed sure is taking their time...

The average retail investor is still licking their wounds from 2008. Many, like myself, put our tiny blood soaked wads in CD's, at .01 percent. There are millions of Americans who can't gamble on a rigged stock market, and relied on a healthy 5% interest rate. This free money being doled out by the Fed to a select few entities will have consequences. My biggest fear is market will finally win over retail investors fr…

The average retail investor is doing just fine. Anyone who did something as basic as hold an S&P 500 ETF is up quite a bit from the crash.

Re: U.S. Tech Funding – What’s Going On?

#87

Post by [deleted] »

foobarqux wrote: post #15

Lot's of points to dispute: Slides talk about S&P IT but no one is concerned with IT public market valuations (at least relative to the rest of the public market). The concern is with private tech market. Slides talk a lot about how the amount of funding is justifiable but the question is whether the valuations are. Lower amounts of funding do suggest there is less at risk, however. How do you reconcile slide 37, whi…

[deleted]

Re: U.S. Tech Funding – What’s Going On?

#88

Post by javert »

Moshe_Silnorin wrote: post #69
nostromo wrote: post #66

Earlier quoted context omitted.

It's another case of the cure (Sarbanes-Oxley) being worse than the disease (another Enron).

>Sarbanes-Oxley We'll never be rid of it. Like copyright law, It's crystallized into a self-perpetuating incentive structure. Everyone knows it's stupid, no individual has much incentive to try and change things. The ability to restore to a previous state is essential in the design of institutions, one lacking in our current governments. This is a very hard problem, but I'm hopeful prediction markets may be able to h…

Yeah, but prediction markets are basically illegal, because---again---government regulation.

Prediction markets are so vastly powerful, both as a financial tool (hedging) and an information tool, that people would be screaming bloody murder if we already had them and then they were taken away.

Re: U.S. Tech Funding – What’s Going On?

#89

Post by graycat »

AndrewKemendo wrote: post #85
thorfish wrote: post #17

Earlier quoted context omitted.

I see it as the cost of forming a startup is much lower now so they can stay private longer. I don't think that is true. Sales and marketing is still very expensive. SaaS needs a lot more cash investment than traditional software, since you are only making the money back gradually. Many of these unicorn software companies are raising a half dozen rounds. Also, the easier it becomes to write software the for the inter…

In fact as a founder I don't think there is anything cheap or easy about it. Especially if you are trying to do anything with significant technical challenges like with computer vision, deep learning, VR etc...

> Especially if you are trying to do anything with significant technical challenges like with computer vision, deep learning, VR etc...

My view is that those are not very promising "technical" directions, exploitations, or "challenges".

My view: Take in data, manipulate it, put out results of the manipulations. Want the results to be valuable in some important sense. For that value, want more powerful manipulations.

Well, any such manipulations are necessarily mathematically something, understood or not, powerful or not. For more powerful manipulations, proceed mathematically, i.e., exploiting powerful classic results and, maybe, doing some new derivations, right, complete with theorems and proofs.

This work needs a background in pure and applied math, but given that background the derivations require just ideas, paper, pencil, and, hopefully, access to a computer with D. Knuth's TeX for writing up the results. Not really expensive.

My view is that it is much better to exploit relatively classic pure and applied math than anything pursued in computer science.

Won't find a lot of traffic going that direction.

Re: U.S. Tech Funding – What’s Going On?

#90

Post by bane »

thorfish wrote: post #3

"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore." It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is…

I'd also add that until the public validation of an IPO and some time trading on the markets, tech companies have just become investment "tokens" that hold arbitrary amounts of wealth as "valuations" that make no meaningful sense. M&A efforts are simply capturing this fanciful valuation and hoping they can sell this token off in some way for more to somebody else.

It's like putting $1 in a sock and under your mattress, claim it's worth $1million and never letting up on that claim by trying to sell your "money sock 1.0" on the open market. You might even be able to get somebody to buy your "million dollar" sock and they'll go and claim to everybody that it's worth this ridiculous amount (or even more ridiculous they'll trade you their "million dollar" hat for your sock so you can both claim private market validation). Then if the hype lives long enough, they can then sell it for $1.2million to another private buyer, or tear it up and sell it off in threads for even more "buy a genuine thread from the million dollar sock! only $1,000!".

It's almost completely divorced from reality.

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